Missing correspondence, incorrect PAYE codes, inaccurate tax calculations, and sometimes simply ridiculous statements are made by HMRC officers.
Seen it all
AccountingWEB members have seen it all in their time, but some people believe that HMRC’s errors are becoming more frequent, and increasingly exhibit a worrying lack of knowledge about the tax system.
Is this your experience?
An example of stunning ignorance of the tax system was provided in a letter from the PAYE and self assessment section of HMRC. Sue Christensen tells the full story in her blog of how her client had class 1 NIC deducted from her self-employed earnings as a dancer, which removed the requirement for her to pay class 4 NIC. But the HMRC officer clearly didn't understand that point.
We have reproduced the full text of that letter, including all the spelling mistakes,but excluded the HMRC officer’s name to spare him any further embarrassment.
"Dear Sir or Madam
Miss F [client’s name redacted]
Thank you for your letter of 14/03/2017
Calls 4 NIC are not national insurance contributions. They do not count all for benefit purposes. They are an additional form of tax paid on self-employed profits.
We do not tax account of class 1 national insurance contributions in tax returns. There is no box where they can be recorded. The class 4 charges to you client for the 13/14 tax year are therefore due and payable. As mentioned they are just extra tax he has to pay on his self-employed profits
This case was eventually resolved when Ruth Owen, (then HMRC director general for customer services) was contacted and had the file transferred to an experienced officer.
Misleading tax calculations
A taxpayer who has already submitted his SA tax return for 2016/17 will receive a statement showing the balancing amount of tax due for 2016/17, payable by 31 January 2018. An AccountingWEB member sent me a copy of such a statement received by his client.
The statement correctly shows the amount due for 2016/17, and the payments on account for 2017/18, payable by 31 January 2018 and 31 July 2018. However, those payments are referred to as payments on account for 2016/17. This substitution of “2016/17” for “2017/18” is clearly an error, but it doesn’t help the taxpayer understand his tax position.
Is this confusing tax statement a system error or just a one-off? Have you seen similar mistakes on the 2016/17 tax statements?
Bad advice by phone
The HMRC helpline can be the unhelpful line if you ask anything slightly complicated. Here is a story from Stuart Jones, a long-term AccountingWEB member:
“I called HMRC to ask how to submit a late claim for the employment allowance. I was told employment allowance wasn’t available for one-man companies in 2014/15 and 2015/16.”
This advice is wrong, as the restriction in the employment allowance for one-man companies was introduced on 6 April 2016, although HMRC is still arguing about the rules, as I highlighted back in April 2016.
Another member recounted: “I phoned HMRC and asked them to stop issuing PAYE reminders for a company which had been dissolved in 2015, and the HMRC operative asked if it was still trading.”
Inaccurate PAYE codes
Nonsensical PAYE codes have been a feature of the tax system for years, but some accountants think the volume of crazy codes has escalated this year. Jill Crawley has seen a spate of OT codes issued. In this case, the OT codes may have been triggered by change of payroll software from 6 April 2017.
Examples of more inglorious PAYE code errors were discussed in this thread: HMRC fixing PAYE.
Lost letters and returns
HMRC is always quick to punish the taxpayer if the SA tax return does not reach HMRC’s offices on time, but its own post handling system leaves much to be desired.
This is a typical story: “Last week a nurse I know said she had received a late return penalty notice from HMRC and she didn't know why. I checked that she wasn't within self-assessment. I told her to phone HMRC and ask them to cancel the penalty and withdraw the tax return. She told me yesterday that HMRC had said there was something wrong with her tax so they'd issued a tax return but she said never received it.”
Do you have examples of outrageous HMRC errors? Please share your story below.
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.